Car Dealership Guy CEO Yossi Levi joins CNBC's 'Power Lunch"

Yossi explains that luxury models grew in popularity in the U.S. over the last decade thanks to low interest rates, a trend that incentivized automakers to make more expensive vehicles.

But after the COVID-19 pandemic, interest rates skyrocketed. Yossi notes that the average rate on a new vehicle is now 10%, a 20-year record. As a result, many buyers can no longer afford the high-end models they were used to.

Unfortunately, battery-powered cars are costly and unprofitable. Ford, for instance, loses roughly $100,000 on each EV it sells. Because of the financial challenges, many electric vehicles are significantly more expensive than their gas counterparts, making them a bad choice for many of today’s price-conscious consumers.

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Thanks to a strong domestic supply chain, Chinese EVs are generally more cost-effective and thus cheaper than foreign brands. This has led to fears that China-made vehicles could easily out-compete U.S. manufacturers once they make their way overseas.

Yossi acknowledges that competition with China is inevitable. However, he also notes that American automakers are finally taking steps to align their offerings with what buyers want, pointing to the return of cheap hybrids. Financing options such as leases are also helping drivers afford vehicle ownership without the burden of high interest rates.

While only time will tell, “Manufacturers are realizing that it is a different economy,” Yossi explains. As long as they can continue to match consumer preferences, they can remain competitive with any threat, foreign or domestic.